M&A Value is different from the Fair Market Value or Formal Value. M&A Value's characteristics are:
•Real transaction/ dynamic
•Buyer and seller have different knowledge and negotiating skills
•Parties imprudent or compelled to act
•Non-cash consideration
•Ultimately beauty in eye of beholder (specific to investor - investment value)
Types of M&A Valuations are:
•Preliminary Valuation: initial frame of reference for client and intermediary, can also be used for strategic planning and reengineering
•Buyers Synergistic Value: private & subjective
•Dynamic Valuation: actual deals
•Formal Valuation: only reference
The Sales Side Preparing the Business for Sale (Exit Planning):
•Three years planning
•Financial reporting clean up, get GAAP accounting, preferably an audit
•Shoring up management and operations
•Gather and follow market place and industry research and intelligence
•Remove and liquidate non-operating assets
•Advance tax planning, especially entity selection
•Raise the profile of the business
Types of Synergies to the Buy Side:
•Operational - Revenue Enhancement - Expanded sales channels, joint market opportunities, etc. - Expense Reduction - Duplicative technology, facilities, and purchasing gains
•Financial - Better Access to Capital or lower cost of Capital
•Access to new markets
•Growth in market share
•Access to new products
•Access to talent
•Enhanced reputation
•Reduction in operating expenses
•Access to distribution channels
•Access to new technologies
•Reduction in number of competitors
•Access to new brands